(1) Entry into and exit from a perfectly competitive industry willDrive price to minimum Long-Run AVCProduce economic losses for entering firmsAllow efficient managers to earn economic profitsDrive price to minimum Long-Run ATC(2) Positive Economic Profits areA long-run operating condition necessary for a monopolistProfits above what it takes to keep the entrepreneur in that businessEqual to producer surplusEqual to the markup of price over Average Total Cost(3) Monopolistic competition is a market structure very much like perfect competition except thatThe demand curves facing firms are perfectly price inelasticEach firm has a strategy for how they will react to other firms’ price or quantityEntry and exit is not permittedFirms differentiate the characteristics of their product

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Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter11: Price And Output Determination: Monopoly And Dominant Firms

Section: Chapter Questions

Problem 4E

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(1) Entry into and exit from a perfectly competitive industry will

Drive price to minimum Long-Run AVC
Produce economic losses for entering firms
Allow efficient managers to earn economic profits
Drive price to minimum Long-Run ATC

(2) Positive Economic Profits are

A long-run operating condition necessary for a monopolist
Profits above what it takes to keep the entrepreneur in that business
Equal to producer surplus
Equal to the markup of price over Average Total Cost

(3) Monopolistic competition is a market structure very much like perfect competition except that

The demand curves facing firms are perfectly price inelastic
Each firm has a strategy for how they will react to other firms’ price or quantity
Entry and exit is not permitted
Firms differentiate the characteristics of their product

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